The tumble in bonds of Dubai’s state- controlled companies to record lows signals growing concern more borrowers will fall behind on debt payments as Dubai World seeks to restructure $26 billion of obligations.
“We are concerned that it’s just not Dubai World that has issues,” said Oliver Bell, the head of Middle East and Africa investment at Pictet Asset Management in London, which has $120 billion under management. “The health of other government- related entities is in question.”
Dubai World property unit Nakheel PJSC’s $3.52 billion of Islamic bonds due Dec. 14 dropped 1 percent, extending yesterday’s 10 percent slide to head for a record-low close at 47 cents on the dollar, according to Citigroup Inc. Bonds sold by DIFC Investments and Dubai Holdings Commercial sank as low as 44.5 cents on the dollar after Moody’s Investors Service cut the credit ratings of six state-run companies. A jump in the cost of DP World Ltd.’s credit-default swaps implied a 35 percent risk that the port operator will renege on debt.
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